Certified Residential Appraiser Practice Exam

Which principle states that real property value is sustained by equilibrium between contrasting elements?

1. Principle of harmony

2. Principle of balance

3. Principle of equity

4. Principle of continuity

The correct answer is: Principle of balance

The correct answer, the Principle of Balance, articulates the notion that the value of real property is maintained through a harmonious relationship between differing forces or components. This principle emphasizes that equilibrium in various elements — such as supply and demand, or differing land uses — contributes significantly to sustaining property values. When contrasting elements are in balance, it fosters a stable environment that can enhance the desirability and overall market value of real estate. In real estate, this principle can relate to the balance between residential and commercial development in a given area, or the balance between different property styles and sizes within a neighborhood. Such equilibrium ensures that no single factor unduly influences the market, which could lead to volatility in property values. For example, an overabundance of one property type, like high-density apartments, without adequate infrastructure or amenities to support them could disrupt this balance and negatively impact property values. Understanding this principle is crucial for appraisers, as it helps them assess how various features of a property or neighborhood interrelate and influence overall valuation, ensuring that their appraisals reflect the true market dynamics at play.